“Channel checks” come under suspicion in a government probe of insider trading
“Wall Street analysts have been left bewildered,” writes Susan Pulliam in Wednesday’s
Wall Street Journal
, “as federal prosecutors begin to home in on insider-trading cases that appear to involve routinely published information about public-company supply chains.”
Case in point: Apple (AAPL), a hot stock with an unusually secretive corporate culture. Today, dozens of analysts and so-called expert networks compete for every scrap of information about Apple that might affect the stock’s performance.
Now one of their favorite tools — calling on (and perhaps paying) sources who work for the company’s suppliers — is in the spotlight.
Fueling analyst concerns is the definition of insider trading that former SEC chairman Paul Atkins gave the Journal:
The Journal article singled out for special mention a Nov. 12 note to clients by Rodman & Redshaw’s Ashok Kumar that suggested, based on “supply chain checks,” that iPad sales might fall short of expectations this quarter. That note — which we reported on here — helped spark a one-day run on Apple that shaved nearly $8 billion off its market cap.
The Journal did not say or imply that either Kumar or his firm was under investigation.
[Follow Philip Elmer-DeWitt on Twitter @philiped]